International Business - Term Paper Example

? International business Role of World Trade Organization on the international business arena WTO is an international organization focused on trade relations between different nations (Kline, 2005, p. 43). WTO agreements provide details on trade rules in the international arena. In such a way WTO tempers challenges of international trade, because WTO’s regulations are developed in accordance with the needs of a certain country and are ratified by parliaments of the countries. 2. Four determinants of national competitive advantage There are four determinants that make country competitive (Porter): “factor conditions, demand conditions, related and supporting industries and firm strategy, structure and rivalry” (Johnson, 2003, p. 54). Factor conditions discuss country’s consideration about production factors (e.g. skilled HR required in a certain industrial area) (Johnson, 2003, p. 54). Demand conditions evaluate country’s national market demand for the good/service to be produced. Related and supporting industries discuss the existence of internationally competitive industries in the home market. Firm strategy, structure and competition are issues defining principles of organizations’ creation, development and management in the home market. 3. Three common characteristics of Multi National Enterprise Multinational Enterprise has three general features: a large corporation with central office and many other branches worldwide. MNE make direct investments in local firms and considers peculiarities of product adaptation to the needs to every particular market (Johnson, 2003, p. 14). 4. Five basic steps in the strategic management process Strategic management is based on five basic steps. First of all, strategy, vision and mission must be developed (Kline, 2005, p. 67). This initial stage is crucial for any company because it sets the main principles of further company’s development. The next step is analysis of internal and external factors. In other words, on this stage company analyzes structural peculiarities of their company and discusses external factors influencing their business. The third step concerns ‘distillation’ of the best choices and possible steps. The fourth step is strategic plan development, which step-by-step describes strategic measures taken by a company. The fifth step is implementation and evaluation of steps considered above. 5. Foreign Direct Investment reasons Foreign direct investment implies company’s physical investment from one country into building a factory/creating some kind of a project etc in another country. Currently, there are several reasons for FDI (Johnson, 2003, p. 71). A desire to be global and to be a successful competitive participant in the international arena, reach potential clients overseas and access a new market are wide spread features of potential FDI. It is also important to note that once export of goods or services produced becomes critically increased then it is more efficient and cost effective to make FDI. 6. As political system change, economic system follows. Statement explanation. A change of political system is a natural process happening in every country. A constantly changing nature of mankind is explained by mankind development and thus countries’ development. When certain political processes take place, then internal income of the country, wealth and occupation of people is gradually changing. Economic development exerts influence on income equality. At this point linearity theory may be applied. In accordance with this theory economic development is a direct way to urbanization leading to communication and higher level of education and finally, to Democracy. Thus we can see a perfect interdependence between political and economic systems. 7. Privatization benefits Privatization is a kind of structural reform occurring in both developed and developing countries. The main goal of privatization is to reach more profound microeconomic efficiency and foster economic growth (Kline, 2005, p. 77). Abundance of inefficient subsidies may be decreased in case privatization is introduced. From microeconomic perspective, managers’ practices may be inefficient, because of public ownership. On the other hand, privatization is a direct way to profitability and efficiency in monopolistic and competitive sectors. 8. MNCs managers ability to increase levels of employees’ awareness of the crucial cultural differences. Issues of cultural difference are of high importance nowadays. Currently the world is developing under global conditions. There is an ever-existent tendency for hybridity and unification. Business world has to develop with regard to these current needs. If organization is able to create pluralistic approaches to HR management in their organization, then it is a right way for success of the company. There are 5 basic categories developed by Kim (1991) (referred to by Kline, 2005) which suggest principles of diversity management in an organization. “Golden rule” underlines necessity of equal attitude to any employee in the organization; a principle of assimilation, which requires adaptation of every employee at the company’s culture; a principle of correcting errors, which existed previously in the company with regard to cultural diversity. Finally, it is necessary to refer to cultural specific of every employee who came from abroad. 9. Understanding of institutional norms, regulations, and practices by international firms There is a need for international firm to be aware of foreign country’s peculiarities on the stage of business development in the international arena. Foreign firms should work in strange environments. Thus there is a possibility of risk. Scott (2001) (referred to by Kline, 2005) underlines importance of regulative elements awareness, e.g. governmental regulations, laws and norms. Normative elements include “socially constructed symbolic representations”; cognitive elements imply “vital templates for framing individual perceptions and decisions” (Scott, 2001). These norms are vital for international firm’s decision making and strategy’s development. 10. IMF role in international business IMF is responsible for establishing and supporting stable currency exchange rate between different countries. Moreover, in a broader context countries may take loans from IMF for their development. Economic policies of different countries are affected by IMF regulations. Consequently, foreign business directly depends on IMF (Johnson, 2003). The primary concern of any business is financing. In case of international relations, it is influenced by IMF regulations. A direct dependence on IMF is also explained by other primary objectives of IMF, such as regulation of global monetary cooperation, financial stability regulation and international trade facilitation. Any international firm depends on these regulations because IMF plays a role of normative regulator in the international arena. 11.External environmental assessment performed by a multinational enterprise Environmental assessment is carried out for evaluating economic and social processes in two contexts: in a broader environment and in a context of a certain industry (i.e. target environment) (Kline, 2005). Environment’s assessment in a broader context is focused on economic, social and political factors influencing on the company. Assessment in a target context is focused on company’s internal attractiveness analysis (e.g. sales forecasts, structural assessment etc). 12. Five key variables of alternative organizational structures for multinational enterprises Multinational organizations are organizations of a large scale. In order to extend their business and work efficiently at home and abroad, multinational enterprises tend to chose between the main potential organizational structures (Johnson, 2003). Global product structure underlines responsibility of domestic enterprises for product groups worldwide, i. e. every domestic division is responsible for its output only. Global area structure implies that every particular manager is responsible only for a certain geographic region. Global functional structure is created on the basis of organization’s tasks. In a mixed structure of organization enterprise’s needs are of the greatest importance. In matrix structure functional and product structures or regional and product structures are combined. Another alternative is transnational network structure. It was developed in order to provide assistance to MNE in global decision making directed on local customers’ needs satisfaction. 13. Centralized/decentralized overseas operations Johnson (2003) underlines that centralized operations are dependant on economical fluctuations, technical knowledge and are rather complicated in comparison with decentralized operations. Centralized operations may be favorable for businesses where centralized control is unavoidable. For example, Deutsche post, a provider of logistics services and express delivery services worldwide needed centralization because of complexity and technical specific of their activities. Decentralized operations imply organization functions’ consideration as profit centers and not as administrative units. Under conditions of decentralization, employees’ incentives and motivations are encouraged. Thus manager of a lower rank has a high level of authority and power (e.g. McDonalds). Thus overseas subdivisions are able to solve their problems by their own efforts and not ask for head office managers’ help. 14. Influential factors on the pricing of goods and services in the international market place Currently, global market place is full of changes and complexities caused by global economic crisis. Therefore pricing of goods and services in the international market is influenced by the following factors: decrease of harvest level which led to price increase on wheat and barley in Europe and some other countries. Another factor is increase of energy prices, which, consequently, led to fuel price increase and transportation costs etc. Moreover, the third fact is that Argentine, Kazakhstan, India, Vietnam and Egypt (Kline, 2005) have increased export taxes in order to protect their own food supply. As a result, prices on the world market have increased. The fourth reason is food products production limitation in EU which led to price increase and a growing demand for food products in Asian countries. Consequently, there is a need to develop agricultural and energetic sectors worldwide in order to eliminate the reason for pricing increase for goods and services in the international arena. 15. Important concepts for multinationals Ongoing market assessment is the first important concept for multinationals to be discussed. This process allows MNCs to evaluate current movement of market prices for stocks, commodities etc in order to predict and develop direction of their activities (Johnson, 2003). For example, internet company Netflix (Internet video provider) follows tendencies in the Internet pricing for stocks of the video services companies in order to regulate their own stock pricing. Facebook, a social network, assesses current situation in the Internet and follows emergence of new social networks in order to remain a successful competitor and refer to the needs of modern users. New product development is another crucial concept for MNCs. This concept is a primary step of any MNC: it implies improvement of a currently existent product, or development a new product. For example, step-by-step product development is considered by the companies who start their businesses. Product improvement may occur in the companies with reliable brand, i. e. constant improvement of already existent mobile phones and other technological devices. Effective pricing is the third issue to be considered. It implies that pricing adjusted to a stock is defined with regard to the needs of current stockholders. Thus, in previous years stockholders of Internet companies would pay much for a high trafficking, but currently this issue is not a wonder to them and it shouldn’t be included in stock pricing. Moreover, an option to be online available for customers is not a wonder also, thus this option can’t be included by any company into stock pricing. 16. Country risk analysis for international manager making Country risk is a process of economic, political and business risks assessment performed by an international manager for a country of potential investment. Economic risk assessment implies assessment of country’s ability to be reliable international partner, its financial assets etc. Political risk assessment is focused on governmental decision making favorable for potential investors. Works cited 1. Kline, J. Ethics for International Business: Decision Making in a Global Political Economy. Routledge, 2005. 2. Johnson, D. and Turner, C. International Business: Themes and Issues in the Modern Global Economy. Routledge, 2003. Read More